Negative Revaluation Reserve on PPE

Dawny

I have just taken over the accounts of a small company and there is a negative revaluation reserve from a historical revaluation on the companies tangible fixed assets.

Should I take this to the P&L as impairment in this year's accounts?

Thanks in advance.

stevef

Yes - you can not have a negative balance in a Revaluation Reserve.

The Revaluation Reserve should hold a separate balance for each asset revalued, none of these individual balances should be negative (even if there are other positive balances to offset it).

Dawny

Thank you.

Gem7321

Has the loss been realised? (ie. has the asset been disposed of or reached the end of its economic life?)

Dawny

The assets were various pieces of equipment which had no value left. But no other loss had been put through the books.

Gem7321

My understanding is that the revaluation reserve is transferred to the P&L as the loss is realised, so with tangible fixed assets this is normally in line with depreciation or when the asset is disposed of so if the asset is fully depreciated then you should write the reserve off to the P&L accordingly. But I stand to be corrected!

Dawny

Yes, this is my understanding too, but I needed someone to confirm it for me so thank you!